RI coffee slowly reaching Asian market

RI coffee slowly reaching Asian market

SINGAPORE (Reuters): Indonesian coffee beans have started to reach the market slowly with stable offers, but the shortage of containers could worsen when the main bulk of the crop arrives later this month, traders said yesterday.

In Vietnam, the other main supplier in Asia, there were only scattered offers as the harvest there moves to an end, they said.

"There have been some small lots of businesses in Indonesia. A few thousand tons. It's coming slowly but steady," said one Singapore-based trader.

"They are still short of containers, but it's not yet a big problem. It could be when the main bulk comes out later," the trader said.

Indonesia, where the harvest started in May and is expected to peak in July and last through September, is now Asia's main coffee supplier.

"I see more local exporters doing business. Foreign houses are pretty quiet," another trader said.

Some exporters stocked the beans in warehouses, waiting for better prices to come, the trader said.

However, Western buyers were not active as the international market was expecting a big Brazilian crop, traders said.

On Monday, Brazil raised its estimate for 1998/99 coffee production to 33.95 million 60-kg bags from its initial figure of 31.17 million. Industry sources said they believed the estimate was on the low side.

In London on Tuesday, benchmark September rose $17 to $1,600, but lower than $1,630 a week ago.

"The weak London level is reducing coffee value here. Sellers are waiting for better prices," the Singapore trader said.

However, if the container problem in Indonesia worsened during the peak harvest season, nervous farmers might rush to sell their beans and push local prices lower, another trader said.

"Then we may see bigger differentials," said the trader.

Indonesian supplies were offered at around $150 per ton under London levels, little changed from a week ago.

Vietnam's benchmark grade 2, five percent black and broken beans were seen by the trade at around $100 under.

"I doubt if the Vietnamese will slash their offers to sell because of Indonesia," one trader said.

"Vietnamese farmers don't have to worry. They already have good profits earlier this year," he added.

Vietnamese farmers held their stocks, described by some traders as hijacking the market, before the Indonesian crop hit the market in May and pushed prices there to almost no discount from London levels at one stage.

"They may just keep whatever levels they are offering now, but it doesn't really matter because they are out of the market and supplies are quite enough," the trader said.

"Indonesia is what people are looking at now."

The arrival of beans in Indonesia's Bandar Lampung from the plantations was at around 1,000 tons daily, up from between 500 and 700 tons a week ago, traders said.

"We have been waiting for business to pick up for weeks.

Hopefully it will soon," said one Bangkok-based trader.

Some areas of Indonesia have not been fully harvested and some farmers were using only their own trucks, making business slow, the trader said.

Indonesia's coffee production is expected to reach 330,000 tons, unchanged from last year, because of the severe drought induced by the El Nino weather phenomenon.

In Vietnam, harvesting is expected to kick off in October and last until January or February 1999 -- later than usual due to a recent prolonged drought.